Billionaire investor Buffett named to USAir's board Airline says it lost $1.2 billion in '92

January 28, 1993|By Suzanne Wooton | Suzanne Wooton,Staff Writer

Nebraska billionaire Warren E. Buffett, one of Wall Street's savviest investors, has been named to the board of the financially troubled USAir Group Inc.

The move came yesterday as the Arlington, Va.-based airline posted a loss of $1.2 billion for 1992, bringing its losses in the past four years to nearly $2 billion. The results -- coming despite significant cutbacks -- were attributed by company officials to intense competition as well as accounting adjustments.

But while losses had been expected, analysts said, Mr. Buffett's joining the board was seen as a welcome development.

"He's one of the most astute investors in America," said analyst Lee Allen of Allen Financial Advisors of Boston, Mass., who nevertheless noted that USAir, like most other airlines, had consistently lost money since 1989.

While bringing significant clout and financial expertise to the board, Mr. Buffett is not likely to catapult the struggling airline out of its financial dilemma, Mr. Allen said.

"The challenges of the airline industry are monumental irrespective of the quality of the board," he said. "No one would say the boards of other airlines lack talent."

Indeed, the U.S. airline industry has lost more than $9 billion in the past four years. Even long-time moneymaker Alaska Air Group, the parent company of Alaska Airlines and Horizon Air, reported yesterday that it lost $84.8 million last year.

Last week, USAir announced a $300 million investment by British Airways PLC, but the nation's Big Three airlines -- American, United and Delta -- immediately urged the Clinton administration to delay approval of the alliance, which could be crucial for USAir's long-term survival.

Mr. Buffett, 62, built his fortune largely through investments in undervalued companies overlooked by others. He is known as "the sage of Nebraska" for his folksy wisdom and seemingly uncanny ability to make money picking stocks, particularly those with long-term value.

Last summer, Mr. Buffett's Omaha investment firm, Berkshire Hathaway Inc., purchased 4.35 million, or 15 percent, of General Dynamics Corp., the nation's second-largest defense contractor. Berkshire also owns significant stakes in GEICO Corp., Gillette Co. and Capital Cities/ABC Inc..

Mr. Buffett first invested in USAir in 1989 when Berkshire purchased $358 million in convertible preferred stock -- an amount equivalent to roughly an 11 percent stake.

According to Dave Shipley, a spokesman for USAir, Mr. Buffett was invited to join the USAir board in 1989 and several times since then but he was "too busy with too many other things.

Also named to the 16-member USAir board yesterday was Charles T. Munger, vice chairman of Berkshire Hathaway.

They have replaced Gen. David C. Jones and Merle E. Gilliand, who retired because of the board's mandatory retirement age rule. Mr. Gilliand has served since 1980 and Mr. Jones since 1982.

In its earnings report yesterday, USAir reported a loss of $1.2 billion on revenue of $6.7 billion. That compared with a loss of $305.3 million on $6.5 billion in revenue for 1991.

Last year's loss stemmed largely from $982 million in one-time expenses, including the cost of reducing the value of aircraft that had been withdrawn from service and a change in accounting for post-retirement health benefits.

Yesterday, the company's stock closed down 37.5 cents a share, at $14.50, on the New York Stock Exchange.

USAir Group Inc.

.. .. .. .. ..Ticker .. .. .. .. Yesterday's

.. .. .. .. ..Symbol .. .. .. .. Cls... Chg.

.. .. .... .. U .. .. .. .. .. ..14 1/2 .. - 3/8

Period ended

Dec. 31 .. .. 4th qtr. .. .. ..Year ago .. ..Chg.

Revenue .. .. $1,634,800 .. ..$ 1,668,700 ..-2.0%

Net Income .. $(254.1) .. .. .$1,600 .. .. .. .--

Primary EPS ..$(5.66) .. .. ..$(0.24) .. .. .. --

.. .. .. .. ..Year .. .. .. .. Year ago .. ..Chg.

Revenue .. ..$6,686,400 .. .. .$6,514,100 .. +2.6%

Net Income ..$(1,228,900) .. ..$(305,300) .. ..--

Primary EPS .$(27.23) .. .. .. $(7.62) .. .. ..--

Figures in thousands (except per share data.)

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